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The time seems right to solicit a financial version of the Proust questionnaire, to gauge the emotional temperature of today's markets.

Q: What just happened?

A: Starting a few weeks ago, the markets—at first gradually and then suddenly—began pricing in a significantly higher probability of a global recession over the coming year. And they did so with haste because the governments of the Western, over-indebted countries simultaneously seem unable or unwilling to sustain or increase their spending in the face of such economic softening. The European monetary authorities seem hesitant to throw their full weight behind even quasi-bailouts of Italy and Spain, by far the largest economies to come under attack by market actors.

The action has been animated, in large part, by too-fresh memories of 2008, when the bank-solvency crisis trumped all reasoned talk about decent stock valuations and the resilience of our economy.

Q: Well, then, is this like 2008?

A: Yes, sort of, but mostly no. It's like '08 in the sense that the markets reliably throw a tantrum before governments take the situation seriously. This will probably happen.

But it's not like '08 in several important respects. First, unlike Lehman Brothers, Greece or Italy or Spain can't be put out of business overnight by a financial-market boycott. Their debt costs can and have gone to punitive levels, but a meltdown of Lehman-like proportions among governments or even European banks is tough to envision.

Note, too, that in 2008, the U.S. stock market was already down 20% in a typical recession-prompted bear market before the systemic madness began to invoke a wholesale liquidation of risky assets. Today, even after the 11% break in the Standard & Poor's 500 in a couple of weeks, we're down less than 5% year to date, in muted recognition that GDP growth has fallen pitifully short of forecasts. Perhaps the best defense against a 2008 scenario is the very active muscle memory among investors conditioned by 2008's experience.

Q: So, then, what's priced into the markets, with the S&P 500 at 1199 and the 10-year Treasury note at 2.56%?

A: Very slow growth, if any at all, and plenty of fear. The spread between the earnings yield (the inverse of the price/earnings ratio) using 2011 profit forecasts on U.S. stocks and the 10-year Treasury yield is more than five percentage points, approximately the same as the earnings-yield-to-government-bond-yield gap in Japan.

Banks have begun charging large depositors to accept their cash. The Barron's Confidence Index, which measures investors' preference for very high-quality bonds over mid-grade bonds, is at a level last seen in December 2009.

Spreads on investment-grade and high-yield corporate bonds, as a percentage of their yield, are as high as they've been since last September and early 2009, respectively. In other words, the markets have rushed to price in more stress than is yet evident in our economy. Let's be clear: Stocks are never fully priced for an outright recession before these things become unequivocal realities. But we've gone a fair distance toward discounting at least a 50-50 chance that this economic recovery will falter even from its recent unimpressive pace.

Q: Is it possible to tell a 10% correction like this one from the start of a bear market?

A: Not in any reliable way. This downturn has punished some bellwether groups, such as smaller stocks and industrials, particularly hard, which is discouraging, and by some lights represents a mere realization of the stresses evident in credit markets for months.

John Roque, technical strategist at WJB Capital, points out that Thursday's selloff took the percentage of S&P 500 stocks trading above their 200-day average to 19%. In the past 17 years, in the seven prior instances when such an extreme was hit, the index was higher two weeks and three months later each time, for a respective average gain of 5% and 15%. But some of those episodes (in 2000, 2001, 2002 and early 2008) were preludes to much lower prices rather than all-clear signals.